Disney Enterprises, Inc. v. St. Honore

Plaintiff
Disney Enterprises, Inc. ("Disney") seeks an order
of attachment against defendant Finanz St. Honore B.V.
("Finanz") pursuant to Federal Rule of Civil
Procedure 64 and New York Civil Practice Law and Rules
("CPLR") § 6210. For the reasons set forth
below, Disney's motion for an attachment is granted.

I.
Background

Because
I assume the parties' familiarity with the underlying
facts, I provide only a brief overview of the litigation and
a description of the facts pertinent to the current dispute.
In 2005, Disney was preparing to launch its
"Fairies" line of consumer products using Tinker
Bell, the iconic Disney fairy, as part of the branding.
Disney already owned the trademark "Tinker Bell, "
but did not own the trademarks "Tinkerbell, "
"Tink, " or the "Big T" (collectively,
the "Trademarks"). In 2006, Disney purchased the
Trademarks from Finanz and what ensued was a series of
litigations, including this case, which began in 2013.

As part
of the purchase agreement for the Trademarks, Disney
contracted for two indemnification clauses from Finanz to
protect itself against any suit brought by Ice Box, Inc.
("Ice Box")- a non-party to the contract-in
relation to the Trademarks. The first indemnification clause
required Finanz to indemnity Disney for its attorneys'
fees in defending any suit brought by Ice Box. In the event
Finanz failed to fulfill this indemnification obligation, the
second indemnification clause entitled Disney to the
attorneys' fees and costs it would incur in bringing an
action to enforce Finanz's obligations under the first
indemnification clause.

Ice Box
did sue Disney in 2010, thus triggering Finanz's
indemnification obligations ("Ice Box litigation").
On November 15, 2013, Disney filed this action alleging that
Finanz failed to fulfill its indemnification obligations as
to Disney's defense of the Ice Box litigation.
Approximately two years later, in October of 2015, after
extensive discovery and multiple depositions, the parties
filed motions for summary judgment. Disney sought partial
summary judgment on liability as to its breach of contract
claims, arguing that it is entitled to both its
attorneys' fees in the Ice Box litigation that Finanz did
not indemnify and its attorneys' fees in this action,
which it undertook to enforce Finanz's indemnification
obligation. Finanz moved for summary judgment as to its
breach of contract counterclaim, arguing that, as to the
expenses for which it had paid Disney in the Ice Box
litigation, it overpaid Disney. On December 5, 2016, 1
granted Disney's motion for partial summary judgment in
its entirety and dismissed Finanz's counterclaim.
See Dkt. No. 62. Accordingly, although the amount of
attorneys' fees Disney is entitled to in both the Ice Box
litigation and the instant litigation remains open, Disney
has already prevailed on the merits.

At a
conference on January 11, 2017, Finanz indicated that it
intended to challenge the reasonableness of Disney's
attorneys' fees in both this action and the Ice Box
litigation, but it first needed discovery as to the invoices
of Disney's lawyers, Schwartz & Thomashower LLP. The
parties represented that they would try to resolve their
disputes, but Finanz soon became unresponsive and ceased
providing any guidance to its counsel Lowenstein Sandler LLP
("Lowenstein") as to how to proceed in this
litigation. Because of this unresponsiveness and Finanz's
failure to pay Lowenstein's legal fees, Lowenstein moved
to withdraw as counsel on March 20, 2017. That motion is not
yet fully briefed, but Disney has already made clear that it
does not challenge Lowenstein's showing that Finanz has
become unresponsive and stopped paying its fees.

On
April 26, 2017, Disney moved ex parte to attach
Finanz's assets. I denied this ex parte motion
without prejudice to a motion made on notice. On April 28,
2017, Lowenstein informed me that it had notified Finanz by
email of the pending application for an attachment and
received no response. On May 1, 2017, I held a hearing on the
motion, which Disney and Lowenstein attended. Lowenstein
informed me that it still had not received any communication
from Finanz. At the hearing, I granted Disney's
application for an attachment and placed an order on the
docket that day. See Dkt. No. 78 ("Attachment
Order"). At the hearing, I indicated that an opinion
would follow.

II.
Discussion

A.
Requirements to Obtain an Attachment

In
federal court, attachment is available "under the law of
the state where the court is located." Fed.R.Civ.P. 64.
In New York, CPLR Section 6212 identifies the requirements
for obtaining an attachment: (1) a cause of action; (2) a
probability that the plaintiff will succeed on the merits;
(3) the existence of a ground for attachment under CPLR
Section 6201; and (4) that the amount demanded from the
defendant exceeds all counterclaims known to the plaintiff.
As to CPLR Section 6201, an order of attachment may be
granted, inter alia, when "the defendant is a
nondomiciliary residing without the state, or is a foreign
corporation not qualified to do business in the state."
In addition to satisfying these statutory requirements, as
the Second Circuit, in Capital Ventures v. Repub. Of
Argentina,443 F.3d 214, 221-22 (2d Cir. 2006), made
clear, the party seeking an attachment must show the
existence of one of the two purposes of an attachment, either
the need to secure a judgment or to obtain jurisdiction.
Lastly, plaintiff must provide an undertaking in an amount to
be determined by the court, but not less than $500. CPLR
§ 6212(b).

Disney
has met all of the requirements listed above: Finanz is a
foreign corporation not qualified to do business in New York;
there is a cause of action; Disney has already prevailed on
the merits; and I have dismissed Finanz's counterclaim.
With respect to damages, Finanz does not dispute that Disney
actually paid $357, 450.25 in attorneys' fees in the Ice
Box litigation. Rather, it disputes only the reasonableness
of these fees. Therefore, while it is possible Disney may not
collect all of the fees it seeks, there can be no doubt that
there will be a monetary judgment in some substantial amount.
As to Disney's attorneys' fees in this action, Disney
has represented to the court that it has spent approximately
$350, 000 thus far.[1]

Additionally,
Disney's showing of the need for an attachment, as
articulated in Capital Ventures, is persuasive. To
show that Finanz is in a tenuous financial state, Disney
offers the following facts: (1) Finanz filed a voluntary
discontinuation of business in the Netherlands, which is
where Finanz has its principal place of business; (2) Finanz
stopped paying Lowenstein's legal fees; and (3) the
United States Patent and Trademark Office ("USPTO")
has deemed certain of Finanz's trademarks abandoned
because of its unresponsiveness to inquiries from the USPTO.
See Declaration of Rachel Schwartz in Support of []
Motion for an Order of Attachment, Exs. F, G, H. These facts
allow one to draw the inference that Finanz is in a
precarious financial state and that Disney may find it
difficult to collect on the expected judgment. See TAGC
Mgmt., LLC v. Lehman, 842 F, Supp. 2d 575, 586
(S.D.N.Y.2012); Intelligent Digital Systs., LLC v. Visual
Mgmt. Systs., Inc.,683 F.Supp.2d 278, 287 (E.D.N.Y.
2010); Davila Pena v. Morgan,149 F.Supp.2d 91,
93-94 (S.D.N.Y. 2001). In addition to these financial issues,
Finanz has exhibited evasive conduct in this litigation since
the January 11, 2017 conference. Since that time (which was
shortly after I found it liable), Finanz: (1) stopped paying
its attorney; (2) stopped communicating with its attorney,
which has caused delay in this litigation; and (3) failed to
respond to (i.e. not opposed) Disney's motion
for an attachment. This evasiveness also supports the need
for an attachment. See Thornapple Assocs., Inc. v.
Sahagen, 2007 WL 747861, at *7 (S.D.N.Y. Mar. 12, 2007).
In sum, Disney has made an ample showing of its need for an
attachment to secure its judgment. Finanz's financial
state seems precarious, its corporate relationships are
obscure, and it has failed to respond to this motion to
clarify its situation.

In its
application, Disney seeks an attachment in the amount of $1,
000, 000 comprised of $357, 450.25 in fees from the Ice Box
litigation, approximately $350, 000 in fees from this
litigation, and a rough approximation of interest and fees. I
conclude that the appropriate amount of the attachment is
...

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